By: A.J. Cook


While we're waiting for a consensus on what to do about the complicated tax code, we're drowning in tax schedules.

As a modest first step, perhaps we can agree to eliminate two stupid laws: tax deduction phase-outs and the alternative minimum tax. Both are public relations stunts by Congress and the President to slam the rich and to slip in unnoticed tax increases. These provisions complicate the system and creep up and bite unsuspecting taxpayers in the pocketbook.

Tax Deduction Phase-Outs. The law currently has about 20 different ranges of phase-outs. For example, if you're covered by an employer retirement plan, your individual retirement account deduction starts going down - - phases out - - after your adjusted gross income reaches a certain amount.

Phase-outs haven't bothered some middle-income taxpayers, until "bracket creep" sticks it to them. Bracket creep comes from inflation increasing income so that last year's middle income becomes this year's rich. Higher taxes result. This is doubly irritating because phase-outs also complicate tax returns.

Alternative Minimum Tax. AMT is another publicity stunt by politicians. A number of years ago, they encouraged investing by offering credits and fast deductions but gave no thought to the obvious results: About three hundred high-income Americans invested heavily, as encouraged, and paid no taxes.

The public, incited by the media, demanded action. Instead of removing the credits and fast deductions, the cowardly politicians adopted the AMT. Now many individuals and corporations must compute their tax the regular way and the AMT way, then pay the higher amount. The AMT, a parallel tax system with limited deductions and its own brackets, requires complex calculations for the taxpayers and increasing administrative costs for the government. The smart Washington crowd, seeing an opportunity for stealth tax increases, disallowed additional deductions so that now the AMT isn't limited to tax shelter investments. With fewer deductions and bracket creep, the AMT no longer stings only the rich. In 1990 it hit 132,103 households and by this year the figure is estimated to be 1 million. In 10 years, projections say, 17 million Americans will pay the alternative tax. These numbers don't include those who compute the AMT only to determine they aren't liable.

Freeze the Code. After our representatives eliminate the insidious phase-outs and the AMT, they should freeze the code to prevent further complications until they get around to paring down or replacing the present law. Without a freeze, politicians will continue adding to the code. Economist Martin Sullivan says this year's budget has special tax exclusions, deductions and credits totaling 131 - - a record.

The unchecked growth in complexity of the grotesque tax code not only makes Form 1040 indecipherable but increases disregard and disrespect of the tax system. It's time for American voters to demand a stop to the insanity.


A.J. Cook is a lawyer and CPA. His tax column appears weekly in numerous newspapers. Why isn't it published in your hometown newspaper? Ask its Business Editor to subscribe.

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Released 4-3-00